The head of South Australia’s major power distributor says that rural communities – including major towns – could soon look after their own generation needs.

And, said Rob Stobbe, the CEO of SA Power Networks, it could be inevitable that all forms of centralised generation and transmission will be made redundant over time.

Stobbe made his comments at the Energy Networks Association conference in Melbourne, where the industry is wrestling with the technology, cultural, and economic challenges of the biggest change in electricity markets in more than a century – and their $75 billion of assets.

The biggest challenge, of course, comes from the emergence of renewables, and distributed generation in particular, which along with storage is threatening to turn the tables on the centralized model.

Stobbe’s prediction that rural communities could go off grid – or create their own micro-grids with just a small connection to the main networks – follows similar remarks by Ian McLeod, the CEO of Queensland distributor Ergon Energy, earlier this week, and from the ENA itself, which has said that regional operators in Queensland and Western Australia would also look to “downsize” their network assets in favour of localized generation and micro-grids. In effect, they are looking to ditch their poles and wires.

Stobbe suggests that is exactly what is going to happen in South Australia, where the power network operator spends 70 per cent of its investment towards meeting just 30 per cent of its 840,000 customer base. Away from the big population centres around Adelaide, there are just three customers for every kilometre of line.

RenewEconomy caught up with Stobbe after his panel session to seek a deeper explanation.

He explained that people in metropolitan areas rarely experience, and have a low tolerance for, loss of power in blackouts. In regional areas, these events can often for for a day or two at a time.

“When it comes to reliability, these alternatives like renewables, going into storage, is actually more reliable than what we can even provide,” Stobbe told RenewEconomy.

“As long as we can top up their storage, it is actually quite a reliable supply. If you look at where it is going to occur first, in my view, I will be in those rural areas.

So what energy sources will they rely on?

“It’s largely going to be wind and solar. If you look at South Australia, some of the best areas for wind is on the west coast, but this is too far away from transmission lines to inject into the grid.

“But if you feed the power into rural areas, with storage, you can see it becoming very attractive in those areas. The benefit for us (the network distributor) is that we don’t need to build that expensive network to service them.”

One striking remark that Stobbe made in his talk to the conference of network operators and other energy market professionals and policy makers, was that, in time, there would be no centralized generation or network operation?

Was he serious about that, RenewEconomy asked him afterwards?

“It gets down to the technology and its availability at a competitive price. Is it one of the scenarios that we are looking at? Yes it is.

“What will be the scenarios in the future? We might just be operating, managing and building micro-grids, in localised area, with their own renewables on site, and some of their other renewable that could support that community. Why wouldn’t that work?

“Why would they have to be connected to a central connection point. You can see it happening.”

That, of course, has serious implications, not just for centralized fossil fuel generators, but for large centralized renewable plants too. And for retailers, who normally have the primary interface with customers. “In the micro grid market, why do you need a retailer,” Stobbe asked. “Our market will change.”

“The reality is that customers, I think they will see value in a network of sorts to enable them – look, if you were growing your own produce to live on, if it’s a bad year, you would need to be part of a market, so electricity is the same.”

It would seem that local Microgrids would be a sensible solution but how do you ensure that they remain competitive both commercially and technically. You could have a neighborhood or municipally owned system that you tender out operation and maintenance for 5-10 years at a time. That should ensure sensible operation and maintenance but how do you guarantee that anyone has an incentive to introduce the most cost effective capital equipment or sufficient equipment to cope with changes in demand eg replacing gas heating with heat pumps, electric cars etc. or in fact timely replacement of current generation hardware with newer and better every 15-20 years.

http://www.reneweconomy.com Giles

Interesting point. One quote from Stobbe that i should have included: He said that network operators need to think of lifetime of the assets it deploys in terms of 5,10 or 15 years, rather than the 50 they based it on previously. So i think he is thinking about that too.

Chris Fraser

Clearly the microgrid will be a living thing. It will be impacted by available wind and solar and demand, so in the absence of cheap storage it may have a degree of dependence on a central generator’s low capacity connections – sometimes but hopefully not usually. The consumption of the local production is likely to provide incentive for efficiencies, microgeneration and storage to be provided by competing private interests. Ultimately the goal would be to keep microgrid design as simple as possible so that replacement grid equipment simply plugs straight in.

Farmer Dave

Very interesting, Giles – Rob makes a lot of sense. What sort of reaction did he get from the industry people present? Was he speaking hypothetically, or was he opening the door to the change actually happening?

http://www.reneweconomy.com Giles

Well, i don’t think that he was about to get himself voted chairman. But i was surprised, see my story later today, about the number of networks thinking his way – Ergon, Horizon, and to a lesser extent Energex and SP Ausnet. It is the generators and the retailers (often the same people) who get completely screwed by this – they got everything to lose. As Stobbe says, there will always be some sort of network!